Repayment of Monies if the Contractual Partner Faces Insolvency? Improvements for creditors

Traditionally, regulations for objections to payments of debtors in a crisis have been applied in favour of insolvency administrators. Following two recent decisions of the Federal Court of Justice and a new draft for amending the Insolvency Code, a new trend in favour of creditors may develop and result in creditors having to repay monies to insolvency administrators less often. (German Federal Court of Justice, decision of 16 April 2015 - IX ZR 6/14; Federal Court of Justice, judgment dated 30 April 2015 - IX ZR 149/14)

Pursuant to Sec. 129 et seq. of the German Insolvency Code (Insolvenzordnung, InsO), an insolvency administrator can reclaim payments made by the debtor to the creditors under certain conditions by contesting transactions of the debtor prior to the opening of insolvency proceedings and in disadvantage to the creditors (Insolvenzanfechtung). In particular, the so-called contestation of wilfully disadvantageous transactions (Vorsatzanfechtung) pursuant to Sec. 133 InsO was literally established as a basic offence for the contestaton by insolvency administrators. Meanwhile, with two decisions of the Federal Court of Justice and a draft of the Federal Ministry of Justice and Consumer Protection to amend the Insolvency Code, a reorientation may take place and limit the applicability of the contestation of wilfully disadvantageous transactions.

For further information please refer to our Update Insolvency Law.